How to Become a Subcontractor and Why

It’s easier than ever to get started on the path to becoming a successful subcontractor in the construction industry. Subcontractors get a sweet deal when it comes to industry requirements, and activities – your ability to network along with your excellent performance at your proficiencies of choice will keep you in bread year-round, even during the off-season when things might not be as busy. Becoming a subcontractor is a process, however, and taking the best path right from the beginning is the best way to secure the lucrative job you want at the end of the day. This resource article details some of the steps to follow to become a subcontractor, the advantages you’ll enjoy once you get there, and some of the challenges you might face as well.

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How to Become a Subcontractor

A contractor is a person or a company that seeks to do business by obtaining contracts and carrying them out. Being a contractor is similar to being a business owner – you negotiate your deals, work for yourself, have your clientele and are rewarded on your own merits. A construction contractor offers a particular suite of skills which he can perform for clients on a contractual basis. As a contractor, you will likely be paid more for work than you would be as a worker because you have put in the effort of finding the customer yourself. Therefore, any profits from contract work belong to the contractor.

1. Gain Skills in Construction: If you’re reading this, you’ve probably already got some of the know-how that you’ll need to be in business for yourself as a subcontractor. Whether you’re doing plumbing, carpentry, roofing, making cabinets, installing tiles or whatever else, it’s important that you’re exceptional at what you do.

2. Get Licensed and Insured: Many states require a license for working in construction fields, in particular for things like plumbing or electrical work. Without these licenses, employers would face serious liability issues when hiring you for work, so it’s important to obtain these honestly and keep them up to date. As an independent subcontractor, you’ll need your own insurance such as employer, property, and liability coverage to make sure you’re adequately protected while you work for clients.

3. Create a Contract Agreement: Now that you’re fully qualified, you need a way to contract your services to a GC. A lawyer can draft a service agreement for you that you can fill in with the payment requirements and scope of work on a per project basis. Never begin working on a project without a detailed contract outlining the scope of work, payment amount, and scheduling and expected time frame for delivery for both parties. It’s your job to ensure that your employers pay on time and as expected.

4. Go Sell Yourself: Now you’re ready to go out and deliver your services, either directly to the consumer or to general contracts that need folks with your expertise to help on larger projects. You’re fully licensed, you’ve got the skills, you have a great service agreement, and you’re ready to start putting yourself to work and earning money as a subcontractor.

Advantages of Subcontracting

One of the most obvious benefits of subcontracting is the self-employment aspect. As your own boss, you’ll have more discretion over what jobs you work on and for what price. You can take as much time off as you need to rest and recoup, and many contractors vary their work schedule with their financial requirements, working just as much as they need to and spending their leisure time with family or pursuing other hobbies.

Not only might you find yourself with more free time, but your market value as a subcontractor is a little higher than as an employee. When you’re an employee, your employer is required to pay taxes, license fees and insurance for you, and this cost is directly tied to their budget for paying you. Once you’re responsible for these things yourself, you can charge more for your services on an hourly basis and perhaps find ways to save on services that your employer would otherwise be required to provide. Many employed tradespeople are surprised to learn that their hourly pay increases by as much as 50% or more when they go into business for themselves as a subcontractor.

Disadvantages of Subcontracting

While you will earn more money subcontracting yourself, there are some disadvantages too. Paying your own licensing fees and insurance are an added overhead cost, and you lose some of the job security that you might have enjoyed as an employee of a GC or construction firm. You’ll need to closely monitor your cash flow situation, as employers are sometimes late with payments, and you may not be eligible for unemployment insurance benefits if business isn’t great. Additionally, you’ll have to seek out customers to contract your service to if you want to get paid, and that itself will require time and resources on your part.

Key Takeaways

A great subcontractor is worth their weight in gold and a significant value-adding asset for any general contractor. In today’s project-based economy, more and more workers are finding employment in a contracting or subcontracting role and managers love the fact that they can pay a fee to get work done without the legal red tape of hiring an employee. Now that you know how to become a construction subcontractor, and you understand the types of subcontractors in the construction industry, the next step is to get your experience and licenses and start earning money!